May Board News

Contributing teacher member Carol Correthers was reelected to the State Teachers Retirement Board in the 2017 election that concluded on May 1. Retired teacher member and current board chair Robert Stein, as well as retired teacher Rita J. Walters, were unopposed for the two retired teacher seats on the board. Walters will be serving her first term on the board. The terms for these three seats begin Sept. 1, 2017, and end on Aug. 31, 2021. Board members receive no compensation for service on the board other than reimbursement for actual, necessary expenses.

During the May meeting of the State Teachers Retirement Board, STRS Ohio staff presented a preliminary look at health care program premiums for 2018. Staff works with health care consultants and actuaries to develop expected costs for the health care plans. The board learned that lower than expected health care claims during the review period for STRS Ohio’s self-insured plans will likely have a positive impact on 2018 premiums for these plans. This means premium increases are expected to be smaller than the consultants’ original projections. The board is slated to approve premiums for the 2018 plan year at its June meeting. Once approved, the premiums will be posted on STRS Ohio’s website.

The board has been studying proposals to improve the solvency of the Health Care Fund. This fund is currently funded through premiums charged to enrollees, government reimbursements and investment earnings. At its April meeting, the board learned that long-term trend increase projections, along with the new actuarial assumptions adopted by the board in March, had a negative impact on Health Care Fund solvency. The fund is now estimated to remain solvent for about 18 years. Staff is working with the system’s actuary, Segal Consulting, to develop options to extend solvency to 30 years or more, with the goal to keep the fund solvent until funding from employer contributions can be used to support the program. The board is expected to continue its discussion on Health Care Fund solvency at its June meeting.

Following the fiscal year 2018 budget presentation at the April board meeting, the Retirement Board requested information regarding retirement system administration and associated costs. In May, staff presented an overview of STRS Ohio’s operating budgets since fiscal year 2006 and the number of full-time equivalent (FTE) staff members. STRS Ohio’s proposed fiscal 2018 operating budget of $99.6 million is slightly higher (0.7%) than the fiscal year 2009 operating budget. The number of FTE staff members has decreased from a high in that period of 624 in fiscal 2008, to the proposed 544 in the fiscal 2018 budget. Other operational efficiencies noted include:

High level of member service — STRS Ohio’s service has been ranked #1 compared to nearly 60 participating systems in CEM Benchmarking’s pension administration survey. While maintaining these high service levels, STRS Ohio’s costs have steadily declined while the average cost of CEM participants has increased.

Low-cost investment structure — STRS Ohio manages about 70% of system assets in-house, a higher percentage than its pension plan peers. Internal management is much less expensive than using external money managers. About 20% of STRS Ohio’s total investment costs are spent on the 70% of assets managed in-house. The remaining 30% of assets are managed by outside money managers — accounting for about 80% of STRS Ohio’s total investment costs. In its most recent study, CEM Benchmarking indicated if STRS Ohio outsourced its internally managed assets and paid the median costs of its peer group, total investment costs would have been about $102 million higher. The CEM study showed STRS Ohio ranked second best in its peer group for lowest investment costs, and its five-year total net return ranked in the top 25% of the peer group.

Retirements Approved

The Retirement Board approved 35 active members and 60 inactive members for service retirement benefits.

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